The PBM Chain How the PBM Pharmacy Wholesaler

The PBM Chain: How the PBM, Pharmacy, Wholesaler, Doctor and Plan Interconnect Troy Wieck, ASA, MAAA Sr. Director, Actuarial Services March 20, 2018 © 2018 CVS Health and/or one of its affiliates © 2017 CVS Health and/or one of its affiliates: Confidential & Proprietary

The Stakeholders • PBM • Member • Plan • Pharmacy • Doctor • Manufacturer

PBM and Member • Coordinate Benefits • Relay Drug Price • Relay Benefit • Insurance Cards • Letters and Communications • Clinical Outreach • Provide information regarding lower prices © 2017 CVS Health and/or one of its affiliates: Confidential & Proprietary 3

PBM and Plan • Negotiate drug costs – Pharmacies and Manufacturers – Client Traditional and Transparent • Clinical Programs • Drug Adjudication • Compliance • Consultation on: – Formulary – Plan Design – Bids © 2017 CVS Health and/or one of its affiliates: Confidential & Proprietary 4

PBM and Pharmacy • Negotiate Drug Costs – Networks: • Broad • Narrow • Performance • Relay Plan Benefit • Measure Performance © 2017 CVS Health and/or one of its affiliates: Confidential & Proprietary 5

PBM and Doctor • Education – Formulary – Benefits – Drug Costs • Utilization

PBM and Manufacturer Negotiate Rebates • Base Rebate • Admin Fees • Price Protection Competition between competitors to obtain favorable formulary status © 2017 CVS Health and/or one of its affiliates: Confidential & Proprietary 7

PBM and Wholesaler Obtain current wholesale price • Used to negotiate drug costs Purchase Drugs for Mail Order 90% of drugs distributed by Amerisource. Bergen, Cardinal Health, Mc. Kesson © 2017 CVS Health and/or one of its affiliates: Confidential & Proprietary 8

PBM and Government • Medicare • Medicaid • Exchanges • Compliance – Pricing/Filing/Bids – Formulary – Data – Regulations • Education Note: PBM’s interact with govenrnents on client’s behalf. © 2017 CVS Health and/or one of its affiliates: Confidential & Proprietary 9